The only remnant of the huge tract of virgin pine that once covered Townsend is at Cathedral Woods, near Archibald lake. Lumbering was king in the area following on the tail of the diminishing fur trade. The railroad came through Mountain in 1896 and Wabeno in 1897 when Jerome Clark first built a store. Glen LaPrariie took over management.

In 1898 Charles Peterson built the hotel and when Matt Cramer took it over, Mark Dietsler built another hotel nearby. The first Townsend school was built at the site of a later dancehall, "picture show" and store. Another log school replaced it in the nearby, and larger, settlement of Coleville. Children of Townsend attended school there, and continued to do so when the new frame school was built as a replacement. By this time, the mill in Coleville had closed and the population of that settlement were leaving, so the frame school was moved to Townsend, where the children attended. This building later became St. John Lutheran Church. First Postmaster, J.P. Schmitt also built the first post office., followed by Warren Fuller.

The settlement was originally called Johnson Siding and was a part of the town of Wheeler until 1914. After that time it was the town of Townsend with Fred Cole as chairman. Residents names included Schmitt, Bennett, Newcomb, Goodwin, Ewer and Glocky. Noted writer, Col. Lew Wallace, who authored "Ben Hur," was reported to have written at least part of that epic during his many vacations there. Information gathered in part by Mrs. Earle Krake.